Volkswagen New Beetle

[Pages:18]Marketing Application Project

Volkswagen New Beetle

by Nichole J. Thurm

Principles of Marketing Dr. Steve Corbin December 10, 1999

Table of Contents

Description and Attributes..........................................................................2 Strengths, Weaknesses, Opportunities, Threats.......................................2-5 Position of the Product in the Marketplace.............................................5-6 Market Segmentation..................................................................................6 Target Markets.........................................................................................6-7 Competitor Analysis.................................................................................7-8 Social Responsibility/Ethics/Legal/Political Environment......................8-9 Distribution/Place Characteristics...............................................................9 Promotion Characteristics....................................................................10-11 Price Characteristics............................................................................11-12 International Marketing Opportunities.....................................................12 Internet Opportunities..........................................................................12-13 Summary of Total Marketing Activities..............................................13-14 Reference Citations..............................................................................15-16 Professor Comments.................................................................................17

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Description and Attributes

The Volkswagen New Beetle is a recreated version of the original Volkswagen Beetle that was sold between 1938 and 1975. The New Beetle was released on the market late in 1997 as a 1998 model and is currently in its third year of production.

The trendy New Beetle has been accepted with open arms by the American automobile drivers although it refuses to follow the conventional style of the cars standard in our market. The New Beetle is a study in symmetry. Its rounded fenders, curved outline, and large oval headlamps and taillights are completely different from anything else on the road.1

Although it resembles the first Volkswagen Beetle it shares no parts with its predecessor. The new version is larger, more powerful, more environmentally conscientious, and offers more luxuries. It is also safer and includes such features as anti-lock breaks, a de-powered air bag, and standard side air bags. The New Beetle is different from the original beetle in that it has a water-cooled front-engine and a frontdrive configuration. It also offers three engines choices: a turbocharged 150-horsepower, 1.8-liter four-cylinder engine; a 115-horsepower, 2.0-liter four-cylinder; and a high-tech Turbo Direct Injection diesel engine. Volkswagen offers various versions of its New Beetle equipped with different features and luxuries to cater to the individual customer.

Strengths, Weaknesses, Opportunities, and Threats Analysis

- Strengths -

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It stands apart from all other cars on the road - Volkswagen Chairman Ferdinand Piech is even amazed at the car's appeal. "It is different, and it makes you feel different," he said. "It's like a magnet."2 It's curved outline, rounded fenders and oversized lights separate it from the other vehicles on the road. The biggest-selling car design in history gets even better - It's cute and trendy, more comfortable than its predecessor and there are a whole lot more luxuries and new technologies crammed into this nostalgic Beetle. The New Beetle's safety surpasses the rest - The 1998 model of the New Beetle is the safest small car that has been tested by the Insurance Institute for Highway Safety.3

- Weaknesses -

It's not an SUV - Americans are showing a strong trend toward purchasing Sport Utility Vehicles rather than conventional sedans. A Gallup Pole recently asked 1,003 adults: Which of the following best describes the type of vehicle you most recently purchased or leased? Their response:

50% 45% 40% 35% 30% 25% 20% 15% 10%

5% 0%

1 Bill Vlasic, "Still groovy after all these years," Business Week 2 Mar. 1998:145. 2 Keith Naughton and Bill Vlasic, "The Nostalgia Boom," Business Week 23 Mar. 1998:64. 3 Bill Vlasic, "Bug-eyed over the New Beetle," Business Week 25 May 1998:88.

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Sedan Pickup Truck

SUV Sports

Car Mini-van Full-sized

van Station Wagon

Small Car Other

Although recent purchase trends put sedans in the lead, projected trends are saying that Americans are leaning toward SUVs. The survey showed that 51 percent of people planning on purchasing within the next year are more likely to purchase and SUV compared to 39 percent purchasing a new vehicle more than a year from now. Also an indicator, three out of four SUV owners say their next vehicle will also be an SUV4.

The Volkswagen New Beetle is termed a "small sedan." Looking at its competing models (which will be discussed later) I would tend to put the New Beetle in the `small car' category which shows very little market favor. Brand loyalties favor American vehicles - The preference for American vehicles is more than three times higher than that of European vehicles. 78 percent of people surveyed in a Gallup Pole said that they would definitely or probably consider buying an American vehicle while only 25 percent said that of a European brand, such as Volkswagen.

- Opportunities -

The New Beetle has a global appeal - Americans aren't the only ones who love this car. There is much opportunity for growth internationally. Japan is predicted to have the potential to be the second-largest New Beetle market. There is also hope that Beetlemania will spread across all of Asia. Capitalize on nostalgic cravings - The old Bug was the biggest-selling car design in history.5 Baby boomers loved their groovy cars as young adults and today's young adults are looking to rediscover the age that passed. As we approach the next millennium there

4 Annette Templeton and David W. Moore, "New Car Purchase Intent Remains Strong in 3rd Quarter," Gallup News Service 4 Nov. 1999.

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has never been a better time to capitalize on the nostalgia Americans are craving. The Beetle is a strong representation of the past and may find itself setting trends for the future.

- Threats -

Can trendy stay alive? - Will the New Beetle survive as long as its predecessor? We see many trends come and go. Does the New Beetle have what it takes to survive? Can the Beetle be duplicated? - Would another car company trying to duplicate succeed? If the success of the New Beetle continues there will be other car makers wanting to hop a ride on the bandwagon. Could the New Beetle survive if another company could produce more cars of similar attributes faster? Will history deter some drivers? - The first Beetles were manufactured in Wolfsburg, Germany, at a plant built by the Nazis. Although the war is long since over, there are still many people who will treat the Volkswagen Beetle with the same prejudice and distaste they feel for the actions of the Nazis.

Position of the P/G/S in the Marketplace

When Volkswagen says "Drivers Wanted," they're not kidding. Volkswagen's American market share has dropped below one percent in recent years. After VW dropped the Beetle from production in 1978 the company was never the same. By 1993 the company was just about ready to drop out of the American market. That's when Chairman Ferdinand Piech ordered up a prototype of a new Beetle as a last attempt to

5 Robyn Meredith, "With New Beetle come wistful hints of old flame," New York Times 4 Jan. 1998:10,

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boost sales. The introduction of the New Beetle to the American market did just that. VW celebrated a 59 percent increase in worldwide sales last year and a 44.6 percent increase this year. I have not found their market share as of 1999 but an increase such as the one they experienced is sure to raise their standings.

Market Segmentation

The New Beetle is unique from other cars in that its market is huge. The range of interest for the automobiles is from 16-year-olds to 65-year-olds. Although the car is under $20,000 it appeals to drivers of many social classes. From college students to CEOs the Beetle has found its way into garages of all classes. What do all of these consumers have in common? Simple, they're tired of driving the same old pod-like cars and the nostalgia the Beetle gives off is comforting and energizing.

Target Markets

Volkswagen executives refuse to be pinned down on the New Beetle's target market saying only that it is designed for "optimists." Yet it's clearly aiming wide. While many of the ads sport jokes targeted at the previous Beetle generation, others are aimed squarely at Gen-X.6

Edmund's web page on automobile reviews identifies the target buyer as "men, women, young people or people who are simply young at heart." The New Beetle is

sec. 1. 6 Keith Naughton and Bill Vlasic, "The Nostalgia Boom," Business Week 23 Mar. 1998:62.

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marketed as classic, classy, unique, and economical. It's for the kind of person who likes to have fun, appear fun, and stand apart from a crowd.

The average U.S. buyer's annual family income is $86,000. This is higher than the average income of buyers of even pricier Volkswagen models which holds an average of $63,000. The typical buyer is from the baby boom generation averaging 44 years of age, more than half are married, only one-third have children at home and slightly more than half of the buyers are male.7 Many of the trendy Beetles are bought as gifts for birthdays, anniversaries or other occasions.

Broken down I would identify the target markets as: Primary: Baby boomers, married with no children at home, male, family income of about $86,000 a year. Secondary: Generation X, married, upper-middle class or lower-upper class. Tertiary: Generation Y, single, middle class. I think that many of the cars for this segment will have a separate purchaser and user. For example, parents buying the car for their child.

Competitor Analysis

Volkswagen's top competitors (as a company) are Ford, General Motors and Toyota. All of these companies are very successful in the American market and provide strong competition for VW which has been struggling in this marketplace in past years. The primary competitors for the Volkswagen New Beetle are the Honda Civic, Hyundai

7 Jessie Milligan, "New Bug Still Has Buyers Waiting Months for Delivery," Fort Worth Star-Telegram 4 May 1999.

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